By Modupe Gbadeyanka
Last week, the Central Bank of Nigeria (CBN) announced a new policy for lenders listed on the Nigerian Stock Exchange (NSE) on the payment of dividends to shareholders.
In a circular posted on its website, the apex bank directed banks with high bad loans and low capital base not to pay dividends to their shareholders.
According to the central bank, this move was to ensure the financial institutions gather enough more to remain in business.
According to the new rules, Deposit Money Banks (DMBs) and Discount Houses (DHs) that have capital adequacy ratios of at least 3 percent above the minimum requirement, Composite Risk Rating (CRR) of ‘low’ and Non-Performing Loan (NPL) ratio of more than 5 percent but less than 10 percent, shall have dividend pay-out ratio of not more than 75 percent of profit after tax while those that meet the minimum capital adequacy ratio but have a CRR of ‘Above Average’ or an NPL ratio of more than 5 percent but less than 10 percent shall have dividend payout ratio of not more than 30 percent.
As investors anticipate the release of financial statements of banks and other companies quoted on the NSE this month, analysts at Corwy Asset have identified four banks that may not pay dividends to shareholders.
In the report obtained by Business Post, among the five biggest banks operating in the country, First Bank may not be able to pay dividends to its shareholders.
In its Q3 2017 financial results, FBN Holdings reported a non-performing loan (NPL) of 20.10 percent against the regulatory maximum of 5 percent, while its NPL for 2016 was 24.90 percent.
Other banks that may not pay dividends to shareholders, going by the new rule, include Skye Bank and Unity Bank.
In addition, the following banks are not expected to pay dividend due to their negative retained earnings/accumulated deficit positions: Union Bank (N244 billion), Unity Bank (N276 billion) and (Wema Bank N38 billion).
Furthermore, “six out of the 15 banks under our coverage would have unrestricted dividend payouts,” Cowry Asset said.
“Another five banks would pay out not more than 75 percent of the profit after tax as dividends and only one bank was restricted to a pay-out ratio of 30 percent,” it added.
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